Glucotrack, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Glucotrack develops non-invasive glucose-monitoring devices and reported no revenue. Amounts below are in U.S. dollars; financial statement amounts are generally in thousands, except per-share data.
Financial results and position
| Metric | Q1 2022 | Q1 2021 or prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $460 | $309 |
| Marketing expense | $0 | $23 |
| General and administrative expense | $633 | $564 |
| Total operating expenses / operating loss | $1,093 | $896 |
| Net loss | $1,093 | $904 |
| Basic and diluted loss per share | $(0.07) | $(0.06) |
| Net cash used in operating activities | $1,265 | $933 |
| Cash and cash equivalents | $4,789 at March 31, 2022 | $6,062 at December 31, 2021 |
| Total assets / total liabilities | $5,359 / $1,128 | $6,265 / $1,110 at December 31, 2021 |
Gross and operating margins are not meaningful because the company had no revenue. Cash, cash equivalents and restricted cash together were $4,839 at quarter-end, down from $6,113 at the start of the quarter. Current assets were $5,231 and current liabilities were $916. Liabilities included $206 in stockholder loans and current and non-current operating lease liabilities totaling $18.
Material changes and operating developments
- Net loss increased by $189 year over year, principally reflecting increased staffing and related costs. R&D expense rose $151, and G&A expense rose $69.
- Management halted or reduced selling and marketing spending while GlucoTrack 2.0 is under development.
- The company is accelerating development of GlucoTrack 2.0, planned as a wireless, rechargeable earlobe sensor paired with a smartphone. Management expects improved capabilities and accuracy, higher company margins and lower customer cost, but these are expectations, not reported results.
- Management is planning a U.S. market entry, including identifying clinical sites, interviewing contract research organizations and planning FDA clinical trials and field testing. It is also working with European partners on a potential GlucoTrack 2.0 distribution roadmap.
- The company changed its name from Integrity Applications, Inc. and its Nasdaq ticker from IGAP to GCTK effective March 14, 2022.
Liquidity, outlook and risks
Management stated that the company has not generated significant revenue and depends on external financing. Its accumulated deficit was $98,559 at March 31, 2022, and it used $1,265 of cash in operating activities during the quarter. Management concluded that these conditions raise substantial doubt about the company’s ability to continue as a going concern. The financial statements contain no adjustments for the outcome of this uncertainty.
The company plans to finance operations through equity and/or debt offerings. An effective shelf registration statement permits registration of up to $100 million of securities, but the filing cautions that financing may not be available and provides no assurance of continued operations. Management expects R&D spending to increase as it hires and develops the next-generation product, subject to available financial resources and business needs. The filing gives no quantified revenue or earnings guidance.
- Product development, clinical testing, FDA requirements, regulatory approval, market acceptance and the ability to obtain financing are material uncertainties.
- Disclosure controls and procedures were reported ineffective as of March 31, 2022 because of material weaknesses in internal control over financial reporting. Management reported no material control changes during the quarter.
- The filing reported no off-balance-sheet arrangements, unregistered equity sales or defaults upon senior securities.
- The CTO gave notice of resignation effective May 22, 2022; the VP of Product gave notice on May 15, 2022, with an expected departure effective June 26, 2022. The filing says the VP of Engineering would assume the CTO’s responsibilities.
Key facts for investors to verify
- Whether the company can raise sufficient capital and how its cash runway changes with ongoing development and clinical-trial costs.
- Progress, cost and timing for GlucoTrack 2.0 development, U.S. clinical trials, FDA-related steps and European distribution plans.
- Whether staffing changes affect product development and execution.
- Remediation of the disclosed material weaknesses and improvement in disclosure controls.
- Actual operating results compared with management’s stated expectations for higher R&D spending and product development.